Anheuser-Busch profit flat at 2005's end

ST. LOUIS -- Anheuser-Busch Cos. Inc., the nation's biggest brewer, said Wednesday its fourth-quarter profit fell 39.5 percent as the increasing popularity of cocktails and wine kept beer sales flat.

St. Louis-based Anheuser-Busch, which makes Budweiser, Bud Light and other beers, earned $201 million, or 26 cents per share, for the period ending Dec. 31, compared with $332 million, or 42 cents per share, during the same quarter the previous year.

Shares of Anheuser-Busch fell 4 cents to close at $41.40 in trading Wednesday on the New York Stock Exchange.

Revenue was $3.9 billion for the quarter, almost unchanged from the previous year, when revenue was slightly less than $3.9 billion.

For the year ended Dec. 31, Anheuser-Busch reported net income of $1.8 billion, down 22 percent from 2004, when net income was $2.2 billion.

Earnings per share for 2005 were $2.35, down 15 percent from $2.77 the year before. Sales last year were $17.3 billion, up from $17.2 billion the year before.

"We've had a challenging year in the domestic beer business and our 2005 sales and earnings per share were disappointing," said Patrick Stokes, president and chief executive officer of the company. "However, as we move into 2006 we are encouraged with the progress of the company's initiatives to enhance beer volume and market share growth."

Anheuser-Busch was hurt during 2005 by lagging beer sales, with consumers more interested in drinking wine, spirits and trendy cocktails, said Anthony Bucalo and a team of analysts with Bear, Stearns & Co.

The most profitable beer brands last year were microbrew varieties that Anheuser-Busch has largely avoided selling, according to a recent report from Bucalo and his team. To regain lost ground, Anheuser-Busch should step up its efforts to develop new products instead of relying on the Budweiser brand to be all things to all people, the report said.

"Innovation has been the key driver of beverage alcohol industry growth in the last decade," the report said. "We see little innovation coming from A-B and without innovation, the top line will likely be stale."

The report praised Anheuser-Busch for disrupting its biggest competitor, Milwaukee-based Miller Brewing Co. It said Anheuser-Busch was successful in its aggressive bid to stall Miller's plan to grab a share of the market from the St. Louis brewery during 2005.

Anheuser-Busch will start 2006 with a massive media blitz. As usual, the company is expected to spend millions on television advertisements during the Super Bowl on Sunday. Later in February, Anheuser-Busch will capitalize on its role as sole beer sponsor for the Winter Olympic Games in Turin, Italy.

The company said it plans to build a six-story pyramid-shaped nightclub called "Club Bud" near the Piazza Vittorio. The company will throw high-profile parties there, including a bash Feb. 13 attended by the U.S. snowboarding team.